The roadmap to achieving the improbable promise of blockchain
Creator of Bitcoin, Satoshi Nakamoto famously said, “A lot of people automatically dismiss e-currency as a lost cause because of all the companies that failed since the 1990’s. I hope it’s obvious it was only the centrally controlled nature of those systems that doomed them. I think this is the first time we’re trying a decentralized, non-trust-based system.”
If we are to take Satoshi’s vision at face value, Bitcoin was one of the first attempts to create a new form of digital money that was truly decentralized. However, since its creation over a decade ago, the debate continues as to whether or not Bitcoin has been able to fulfill the original vision.
As Erik Voorhees once shared with BitcoinMagazine “[Bitcoin is…] a decentralized technology, yet most things existing upon it are centralized.”
Although many in crypto today believe that Bitcoin was an admirable effort at creating the world’s decentralized form of money, it falls short in a few key ways.
For one, as the blocks have become harder to mine, a very select few of wealthy miners have positioned themselves to maintain their control over the network.
Decentralization, a decade later
After the publishing of the Bitcoin whitepaper in 2008, anyone with an interest in the technology could set up their laptop computer to mine Bitcoin. However, as Bitcoin grew and the Blockchain became more resource intensive, miners needed to continue investing heavily in hardware designed specifically to mine Bitcoin at a premium cost - ASIC Miners.
Currently, it’s virtually impossible for an average internet user to have the resources or finances needed to mine Bitcoin, which leaves the power of the network in a select few hands.
Furthermore, it is still technically possible for a 51% attack to occur - in which a group of miners could then prevent and reverse transactions on the Blockchain.
Given the overwhelmingly positive impact a truly decentralized form of money and Blockchain could have on commerce, government, and more, many companies are working to complete the last mile of Bitcoin’s original vision of decentralization.
Once such organization that is working to create a decentralized form of money and Blockchain is Algorand.
While certainly not the first to attempt to build a genuinely decentralized cryptocurrency and Blockchain, Algorand and its team have seemingly presented a solution to solving the famous trilemma.
“As sustained by the evidence of 2000 and counting blockchain projects so far, the trilemma essentially states that existing blockchains can offer at most two of the following three properties: security, scalability, and decentralization,” says founder of Algorand Silvio Micali.
Here’s how Algorand is working to address the three pillars in unison.
Every network carries some level of security risk, as mentioned, despite being the most stable and largely used Blockchain in existence, Bitcoin is susceptible to the 51% attack. There will always be malicious actors in all markets and industries.
To prevent major attacks on the network, Algorand’s team of cryptographers have worked to develop a system in which they believe puts the highest possible cost on acting maliciously.
The Algorand network operates under the assumption that up to 20% of the network users are malicious. This 20% of individuals could be trying to change transactions and so forth.
Because the Algorand consensus operates with a 1:1 mapping for users stake in the network and their voting power, malicious actors attempting to maintain more than 20% control of the chain would inevitably hurt the value of their own dollar.
A rational investor, malicious or not would not have an incentive to destroy the network in which they are invested.
“1 to 1 mapping between the stake and power in the consensus ensures that the users are aligned with good decision making processes for things to move forward” says head of cryptography at the Algorand foundation, Sergey Gorbunov.
The 2nd pillar of the trilemma involves the ability of the network to scale. As it currently stands, Bitcoin for example, can only handle three to four transactions per second.
Given Bitcoin would need to handle hundreds of thousands of transactions per second if it were to be adopted globally, it prevents Bitcoin from reaching its true potential.
“Ethereum has a similar problem — as its co-founder Vitalik Buterin himself admitted. The network has a maximum capacity of 15 transactions per second, and he warned that if the status quo remains, the industry’s infrastructure will be unable to cope” notes Connor Blenkinsop of CoinTelegraph.
The team at Algorand began with scalability in mind, which is why during a recent world testnet scalability test, Algorand’s block creation time was 5 seconds, and the average transaction speed per second is in the thousands.
Decentralization is another core component of the trilemma which so far has proven incredibly difficult to pull off.
“A unique innovation introduced by Algorand to solve this problem is secret self-selection. At a high level, each user plays her own fair cryptographic lottery, at the end of which she is the only one to know whether she is a member of the committee” says Gorbunov.
Because the validations are chosen at random, no one knows who will be proopsing or verifying the block until it is complete, and the random selection occurs on a local device which speeds of transaction and processing times.
Since anyone and everyone can be a part of the network, the barrier to participation is low allowing for all to be a part of the consensus. Furthermore, the current Algorand network has been tested on the incredibly affordable electronic device Raspberry Pi, meaning you don’t have to significant amounts of capital to join the network.
While participation within the consensus is encouraged, every ALGO holder has the option to participate or note. You can register your key and simply hold your token, or participate in ensuring the network continues to grow at scale.
Additionally, the decentralized autonomous governance functionality is built into Algorand protocol from day one. Technical specifications, upgrades or network rule changes are also decentralized. The process is as simple as block creation. As long as the majority of parties agree on the net set of changes, the consensus is reached.
In particular, Algorand foundation was established to help assist with technical upgrades and specifications of the Algorand protocol based on what users want. The foundation includes a team of economists, cryptographers and more to assist the process. That said, the Algorand foundation does not have any more direct control over the protocol than that of an average Algorand user.
Solving the Scalability Trilemma
While it remains to be seen if Algorand will ultimately be able to implement their vision of perfecting the trilemma solution, one thing is certain: more and more crypto projects will continue to innovate until perhaps one day full decentralization is finally achieved.
Algorand’s upcoming dutch auction token sale will be their first big test of making the organizations mission a reality.